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Monday, November 8, 2010

Interview with Bill Clark, MicroVenture Marketplace

If you're a company looking for just a small amount funding, there seems to be a decreasing number of places you can go to find capital. One local startup, Austin-based MicroVenture Marketplace (www.microventures.com) is hoping to help that, with its own service to connect entrepreneurs and small business owners with "micro" investors. We spoke with Bill Clark, CEO of the company to understand the concept behind the firm, and what it offers to its customers.

Bill, thanks for the time today. What's MicroVentures all about?

Bill Clark: What we do, is we help startups raise capital through our online platform. What that platform does, is it brings investors and businesses together so that an investor can look through businesses might be interested in, and make investments. On the investor side, it gives investors who don't normally have access to deals, and gives them a way to get better deal flow than they might have on their own. Because we're a broker dealer, we can look at these businesses raising capital, to aggregate them, and do due diligence on them. One of the ways we are unique, is we allow an investor to invest as little as $250 to $5,000 right online. When you typically have angel investors, they usually have to invest $25,000 to $50,000 in a deal, which really limits the amount of investments that an investor can participate in. This will allow investors who don't normally get the opportunity to invest, and invest a lower amount of money, so they can be more comfortable with that investment.

What's your background, and how did you started the company?

Bill Clark: I've been in risk management and small business risk management for the last ten years. Over the last three or four years, I have been witnessing first hand the credit crisis, and the contraction of loans and the ability of businesses to have access to loans. They're not only not getting approval, but they are seeing their lines shrinking. They just don't have the ability to grow or get financing. Over the last year and a half, I had been trying to figure out how to help businesses raise capital. I'm a fan of Kiva, and have been an investor in Kiva for a long time, and also Prosper.com, and I looked at those and said--what if I could model off of those, and add a twist--so instead of providing a loan, you're actually purchasing an investment? Instead of providing a loan, you actually get shares in a company, and you can follow along in the progress of a company. If they are successful, you have the potential for that firm's stock shares to increase in value. We went through discussions with the SEC and lawyers trying to figure out the right way to make this work, and were finally able to come to something that was a workable solution. We went about becoming a broker dealer to facilitate the whole deal, so that it would work on the investor side as well as the business side, so we can help with due diligence and get things packaged for the investor.

Is there a specific kind of business you're targeting that might be raising money?

Bill Clark: We don't really restrict it to any type of business. We are interested in looking at any business that has a great idea, in any industry. What we are seeing a lot of right now is social media, green technology and clean technology deals. But, the great thing about the Internet, and what it's allowed us to do as a business is that there are businesses that don't need to raise as much money as they used to. They are able to outsource and crowdsource for different types of activities, so they can reduce their costs. That means we're able to help companies who are just raising $250,000 to $500,000, who a couple of years ago had to raise $1M to $2M to do the same thing. Currently we're focused on companies raising between $150,000 and $500,000, and will be looking to help companies raise up to $1M in the next year as our investor base increases.

There are lots of sites to list business deals and pitches - how are you going to get above noise?

Bill Clark: We cater to a unique crowd. With other sites, all that they do is just match people. Any business looking for capital can go in and put a request out there, or a business plan, or a proposal. Investors can then search for those deals, decide if they want to invest. But, at that point, they have to contact the business and go through funding documents, and if they can't invest the whole $200,000 or million dollars a firm is looking for, they need to wait for more investors to come in and cover the rest of the amount. How we're unique, is not every business that comes through gets listed on our platform. We do due diligence on all of those companies, asking them what they are going to use the funds for, what does your business plan look like, and what is your proposal. We'll even look at the executives, and see if we have to do a background check, or event a site visit. We look at projected financials, and create a private placement memo and funding document. We put that on our site so that investors can review them. So the big differences are one, we do due diligence on the companies, and number two, investors can invest right on our site rather than contacting the business. We actually handle the money--not personally, the money goes into an escrow account, where it sits until we raise the full amount--and we help the companies with the whole process.

We imagine this kind of business has lots of legal complexity. How do you handle that?

Bill Clark: Yes, from day one, we've been figuring out all of the different regulations and how to raise money through private offerings. What we do is help businesses with how to raise capital, the different regulations they have to follow, and go through the exceptions for private placements, such as Reg D., 506, which allows for accredited investors and up to 35 sophisticated investors to invest. What that means, if you can make an investment decision without the help of others, we can place them. We donít recommend investments, and it's up to you, but we help with the exemptions and filing with the SEC and the various states that the offering will be made in. We'll get the offer in as many states as possible to allow more investors with access to the business plan and help get it funded.

Finally, how are you funded yourself?

Bill Clark: We are boostrapping. Myself, and two other have invested in MicroVentures.